C is corrent. The undiscounted expected net future cash inflows ($450,000) are less than the carrying amount of the equipment ($500,000). Therefore, the equipment is deemed impaired. The impairment loss is calculated by subtracting the fair value of the equipment ($375,000) from its carrying value ($500,000). (Note: Both values are at the impairment date, June 30, year 1.) The impairment loss that should be reported on Maxwell’s June 30, year 1 income statement is $125,000.
A is incorrect. The undiscounted expected net future cash inflows ($450,000) are less than the carrying amount of the equipment ($500,000). Therefore, the equipment is deemed impaired. The impairment loss is calculated by subtracting the fair value of the equipment ($375,000) from its carrying value ($500,000). (Note: Both values are at the impairment date, June 30, year 1.) The impairment loss that should be reported on Maxwell’s June 30, year 1 income statement is $125,000.
B is incorrect. The undiscounted expected net future cash inflows ($450,000) are less than the carrying amount of the equipment ($500,000). Therefore, the equipment is deemed impaired. The impairment loss is calculated by subtracting the fair value of the equipment ($375,000) from its carrying value ($500,000). (Note: Both values are at the impairment date, June 30, year 1.) The impairment loss that should be reported on Maxwell’s June 30, year 1 income statement is $125,000.
D is incorrect. The undiscounted expected net future cash inflows ($450,000) are less than the carrying amount of the equipment ($500,000). Therefore, the equipment is deemed impaired. The impairment loss is calculated by subtracting the fair value of the equipment ($375,000) from its carrying value ($500,000). (Note: Both values are at the impairment date, June 30, year 1.) The impairment loss that should be reported on Maxwell’s June 30, year 1 income statement is $125,000.
|
